US open: Dow tumbles 170 points on Chinese worries
US equities fell sharply early on Tuesday, in the wake of China’s decision to devalue its currency by lowering the daily fix to the dollar by 1.9%.
Dow Jones I.A.
38,675.68
04:30 15/10/20
Fossil Group Inc
$1.01
10:59 03/05/24
Kraft Foods Group, Inc.
$88.19
11:00 08/06/16
Nasdaq 100
17,890.79
12:15 03/05/24
S&P 500
5,127.79
23:26 03/05/24
Shake Shack, Inc. Class A
$107.47
11:10 03/05/24
Symantec Corp.
$20.03
13:00 03/05/24
Just after 1500 BST, the Dow Jones Industrial Average was down 170 points to 17,445.20, while the S&P 500 and the Nasdaq were 14 and 17 points lower respectively.
China's decision surprises investors
Equities in Asia fell following reports the People's Bank of China (PBOC) has taken an extreme stimulus step of allowing the Chinese currency to devalue almost 2%, in a bid to help exports and fight against the growth slowdown.
“While markets normally welcome any form of China stimulus with open arms, today's move in the wake of truly awful weekend trade data is being interpreted as admission of growth slowing by even more than those rather questionable official statistics are to have us believe,” said Mike van Dulken, head of research at Accendo Markets.
Analysts believe the PBOC’s decision could complicate things for the Federal Reserve, given the strong commercial relations between the US and China.
“The move into treasuries may also reflect a belief that the action from the PBOC makes monetary tightening from the Fed more difficult,” Jasper Lawler, analyst at CMC Markets.
“A devalued yuan makes the dollar stronger, further weighing on US exporters and is also a reaction to China’s weak economic position which is a negative for global growth.”
The dollar was broadly flat against the pound and lost 0.46% against the euro but gained 0.14% against the yen, while gold futures jumped 0.58% to $1,110.50.
Elsewhere, European stocks declined in the wake of the PBOC’s decision, although Athens’s stock market climbed following news Greece had reached an agreement to unlock a third bailout package.
Meanwhile oil prices plunged, with West Texas Intermediate losing 3.71% to $43.35 a barrel, while Brent shed 2.46% to $49.20 a barrel.
Figures released on Tuesday by the Labor Department showed productivity rose 1.3% month-on-month in the second three months of the year compared with an upwardly revised 1.1% decline in the previous quarter and in line with consensus expectations for a 1.6% increase.
Google surges on Alphabet news
In company news, Google surged 6.03% after the tech giant announced it was reorganising its operations into a new holding company called ‘Alphabet’.
Food and beverage giant Kraft Heinz climbed 0.80%, despite saying on Monday night that its second quarter revenue fell short of expectations.
Burger chain operator Shake Shack surged 6.74 % after posting better-than-expected results late on Monday.
Fashion accessories designer Fossil Group and back-up solutions provider Symantec will report after the close.